Renewable Energy Tax Credit Lexicon

Novogradac & Company LLP’s Renewable Energy Tax Credit Lexicon offers definitions for terms used in the renewable energy tax credit (RETC) and clean renewable energy bond (CREB) industry.

Clean Renewable Energy Bond (CREB)
IRC Section 54(d) provides that a clean renewable energy bond means any bond issued as part of an issue if: the bond is issued by a qualified issuer pursuant to an allocation by the Secretary to the issuer of a portion of the national clean renewable energy bond limitation under section 54(f)(2); 95 percent or more of the proceeds of the issue are to be used for capital expenditures incurred by qualified borrowers for one or more qualified projects; the qualified issuer designates the bond for purposes of section 54 and the bond is in registered form; and the issue meets certain requirements described in section 54(h) with respect to the expenditure of bond proceeds, including a requirement that the issuer reasonably expects, as of the issue date, that at least 95 percent of the net proceeds will be expended within 5 years.

Clean Renewable Bond Lender
IRC Section 54(j)(2) provides that a clean renewable energy bond lender is a lender that is: a cooperative that is owned by, or has outstanding loans to, 100 or more cooperative electric companies and was in existence on February 1, 2002; or any affiliated entity controlled by such a lender.

Closed-Loop Biomass
Closed-loop biomass is any organic material from a plant that is planted exclusively for use at a qualified facility to produce electricity.

Energy Property
Energy property does not include public utility property, passive solar systems or pool heating equipment.  To qualify, the original use of the equipment must begin with the taxpayer or it must be constructed by the taxpayer. The equipment must also meet any performance and quality standards in effect at the time the equipment is acquired. The energy property must be operational in the year in which the credit is first taken. 

Geothermal Energy
Geothermal energy is energy derived from a geothermal deposit as defined by IRC Section 613(e)(2).

Geothermal Energy Property
Geothermal energy property includes equipment used to produce, distribute, or use energy derived from a geothermal deposit. It does not include geothermal heat pumps. For electricity produced by geothermal power, equipment qualifies only up to, but not including, the electrical transmission stage.

Hybrid Solar Lighting Systems
Hybrid solar lighting systems are those that use solar energy to illuminate the inside of a structure using fiber-optic distributed sunlight.

Hydropower Production
Hydropower production means the incremental hydropower production for the tax year from any hydroelectric dam placed in service on or before 8/8/2005 and the hydropower production from any non-hydroelectric dam described in IRC Section 45(c)(8)(C).

Indian Coal
Indian coal means coal which is produced from coal reserves which on 6/14/05 were owned by an Indian tribe or held in trust by the United States for the benefit of an Indian tribe or its members.

Municipal Solid Waste
Municipal solid waste is solid waste as defined under paragraph 27 of 42 U.S.C. 6903. Refined coal is a liquid, gaseous or solid fuel produced from coal or high carbon fly ash meeting the requirements of IRC Section 45(c)(7).

Open-Loop Biomass
Open-loop biomass is solid, nonhazardous, cellulosic waste material; lignin material; or agricultural livestock waste nutrients as defined in IRC Section 45(c)(3).

Poultry Waste
Poultry waste is poultry manure and litter, including wood shavings, straw, rice hulls and other bedding material for the disposition of manure.

Qualified Issuer
For the purposes of issuing clean renewable energy bonds (CREBs) IRC Section 54(j)(4) defines a “qualified issuer” as: a clean renewable energy bond lender; a cooperative electric company; or a governmental body.

Renewable Energy Investment Credit
IRC Section 48 provides an investment tax credit for solar projects. The ITC is equal to 30 percent of the cost of the facility

Renewable Electricity Production Credit
IRC Section 45 provides a production tax credit to owners or operators of electric generation facilities that produce electricity from “qualified energy resources.” These include wind, biomass, geothermal, solar, irrigation, solid waste and hydropower. The PTC is based on the amount of electricity produced by the facility, and is currently 1.9 cents per kilowatt hour over a 10-year period. 

Resources
Resources means wind, closed-loop biomass, poultry waste, open-loop biomass, geothermal energy, solar energy, small irrigation power, municipal solid waste, hydropower production, refined coal and Indian coal.

Small Irrigation Power
Small irrigation power is power generated without any dam or impoundment of water.

Solar Energy Property
Solar energy property includes equipment that uses solar energy to generate electricity, to heat or cool (or provide hot water for use in) a structure, or to provide solar process heat.
 
Subsidized Energy Financing
Subsidized energy financing means "financing provided under a federal, state, or local program, a principal purpose of which is to provide subsidized financing for projects designed to conserve or produce energy." Under IRC Section 48, if a project is financed in whole or in part by subsidized energy financing or by tax-exempt private activity bonds, a business must reduce the basis for calculating the credit by the amount of any such incentives received.